Where’s the bottom?

If the super computers that some blame for Wall Street’s recent wild swings were used to trade aircraft, it’s likely they would be programmed to buy right now. But aircraft purchases and sales still occur the old-fashioned way, which can involve deal-stalling high emotions and conflicting personalities.

Nevertheless, sales continue to be finalized. During the typically slow summer, in fact, inventory held at two-year lows, which was surprising, especially in light of a year-long barrage of negative headlines about corporate jets. This suggests that buyers believe they’re seeing great values. Interestingly, they’re seeing them even in markets that are saturated with inventory, including those for mid-size aircraft that have as much as 15 to 20 percent of their fleets on the sales block.

Other model types–such as large-cabin, long-range aircraft–are in much shorter supply, with 5 percent or less of the fleet for sale. Meanwhile, smaller-cabin, older-generation airplanes finally seem to be approaching the tipping point in terms of pricing that will attract buyers. One right-priced aircraft arriving on the market often blasts a wake-up call to sellers who may have been dreaming of charging an unrealistic amount for the same model type. Once a broker can convince the seller that recent low-priced sales are not "one-offs," the resulting price adjustment can act as a catalyst for others to sell for less, and that can begin to move a market.

I’m far from being the only industry observer who looks in disbelief at how far aircraft values have fallen and wonders whether they could decline even further. While it’s hard to believe that they could, the experience of the last couple of years makes me hesitate to call a bottom. We should get insight into what lies ahead as we embark on what is typically one of the year’s most active buying periods.